Save Emissions. Live Better. – Walmart’s Gigaton Gauntlet
Walmart wants to get a billion tons of emissions out of its supply chain by 2030. How can it work with suppliers on a voluntary basis to do so?
It Started with A Hurricane
For Walmart, concern about climate change started with a hurricane, was sustained benefits to their bottom line, and has now extended to their supply chain. In the aftermath of Hurricane Katrina, Walmart’s then-CEO Lee Scott realized the severe risks of climate change.[1] In 2005, Scott announced a new sustainability strategy in a speech that was broadcast to all 1.6 million Walmart employees.[2] In the speech he argued, “We should view the environment as Katrina in slow motion.”[3] While some within the company were skeptical at first, many were convinced when they saw the benefit sustainability efforts could have in terms of cost savings. From 2005 to 2015, Walmart doubled the efficiency of their vehicle fleet, preventing 650 thousand metric tons of carbon emissions, and saving the company more than a billion dollars.[4]
Walmart is the largest retailer of groceries in the U.S. and has significant exposure to climate change risk in their supply chain, especially when it comes to price volatility in staple goods. As PWC has argued, commodities like rice, wheat, and maize are more vulnerable to the impact of climate than other goods that have less concentrated production.[5] Recognizing this and that “80% of the emissions associated with U.S. retail and consumer goods industry is in the supply chain,”[6] Walmart announced Project Gigaton in 2016, a voluntary effort to eliminate one billion tons of emissions from its supply chain by 2030. Walmart reports this is the emissions equivalent of removing 211 million passenger vehicles from the road for a full year.[7]
Getting to a Gigaton
In the next few years, Walmart is seeking to get its suppliers to join Project Gigaton by setting their own emission reductions goals and by creating concrete tools to measure progress. Because of the scale of their supplier network, Walmart worked with the Environmental Defense Fund (EDF) to create an online platform that gives suppliers resources for setting their targets across six buckets of sustainability.[8] This platform gives sample goals suppliers can use to craft their commitments, links to resources and stories of Walmart’s suppliers’ success to date, and focuses on the ROI that suppliers can get from reducing emissions.
In addition, in the next two years, EDF will work with Walmart to map where suppliers should focus their efforts. They will use sales data to examine the biggest carbon emissions sources and where they can be eliminated most cost-effectively, as they have done previously with Walmart’s internal efforts to reduce emissions.[9]
Over the medium term, Walmart will shift to quantifying the impact of carbon reduction and sharing best practices between suppliers. Walmart will require suppliers to report progress towards emissions goals annually, a process that began last month. Walmart will also explore ways to improve sharing information about tactics suppliers can use to reduce emissions. Walmart spokesman Micah Ragland said in an interview, “This is a supplier-driven initiative, we want to be responsive to the needs of our suppliers to figure out what can be improved and share innovations.”[10] Walmart wants their suppliers to set concrete and achievable goals, and to ensure they have the resources to follow through on them.
Beyond a Gigaton
Walmart and EDF are currently aggregating commitments and sharing resources to help suppliers cut emissions. To mitigate risk associated with climate change, Walmart should also consider how it can share technology that can reduce emissions across its supply chain. Walmart is in the process of piloting blockchain technology with IBM and some of its suppliers that would allow it to closely track food shipments and thus forecast and reduce waste.[11] Walmart should share such technology with its suppliers to ensure they are able to meet their goals.
A gigaton of emissions reduction is important, but without significant policy change at the state, federal and international level climate change will continue to pose a risk. Walmart has been outspoken in favor of the Paris Climate agreement but should consider activating its supplier network as part of its advocacy work.[12] Project Gigaton will build a community of suppliers who care about sustainability, and Walmart should capitalize on this to make an impact on climate policy.
Is Voluntary Enough?
Walmart has put out a moonshot effort to get suppliers to consider how they can reduce emissions and mitigate climate risk. However, Gigaton is a voluntary initiative. In the past, Walmart has required its suppliers to become more sustainable by eliminating certain harmful chemicals.[13] Should Walmart consider creating a mandatory version of Project Gigaton? With such a diverse supplier base, what would the parameters of a mandatory Gigaton be?
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Sources
[1] Andrew Winston, “Will Today’s Devastating Weather Change Business the Way Hurricane Katrina Did?” Harvard Business Review, September 13, 2017. https://hbr.org/2017/09/will-todays-devastating-weather-change-business-the-way-hurricane-katrina-did Accessed November 2017.
[2] Erica L. Plambeck and Lyn Denend, “The Greening of Wal-Mart,” Stanford Social Innovation Review, Spring 2008, https://ssir.org/articles/entry/the_greening_of_wal_mart, accessed November 2008.
[3] Lee Scott, “Twenty First Century Leadership,” speech to all Walmart employees, October 23, 2015, https://corporate.walmart.com/_news_/executive-viewpoints/twenty-first-century-leadership, accessed November 2017.
[4] Author’s interview with Micah Ragland, Director of Corporate Sustainability Communications for Walmart, conducted by phone, November 10, 2017.
[5] Richard Gledhill, Dan Hamza-Goodacre, Lit Ping Low, “Business-not-as-usual: Tackling climate chain supply risk,” PwC, 2013.
[6] Berman, J. (2017). “Walmart’s “project gigaton” focuses on major supply chain greenhouse gas emissions reduction effort.” Logistics Management (2002), 56(7), 16-17. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1920223655?accountid=11311, accessed November 2017.
[7] Walmart – Project Gigaton, https://www.walmartsustainabilityhub.com/project-gigaton, accessed November 2017.
[8] Ibid. These include energy, waste, packaging, agriculture, deforestation and products.
[9] Author’s interview with Elizabeth V. Strucken, Managing Director EDF, conducted by phone, November 8, 2017.
[10] Interview with Micah Ragland, November 2017.
[11]Robert Hackett, “Walmart and 9 Food Giants Team Up on IBM Blockchain Plans,” Fortune, August 2017, http://fortune.com/2017/08/22/walmart-blockchain-ibm-food-nestle-unilever-tyson-dole/, accessed November 2017. Interview with Micah Ragland, November 2017.
[12] Ben Popken, “Big Business Urges Trump to Stick With Paris Climate Accord,” NBC News, May 2017, https://www.nbcnews.com/business/business-news/big-business-urges-trump-stick-paris-climate-accord-n766641, accessed November 2017.
[13]Lauren Coleman-Lochner and Andrew Martin, “Wal-Mart Asks Its Suppliers to Stop Using Eight Chemicals” Bloomberg, July 2016, https://www.bloomberg.com/news/articles/2016-07-20/wal-mart-asks-suppliers-to-remove-eight-chemicals-from-products, accessed November 2017.
First of all, congratulations on the excellent article. I had no idea about this Project Gigatron, and now I am aware of its potential to positively impact the environment.
In my point of view, as the biggest retailer in the World, it is undeniable that Walmart plays a critical role on designing the future for supply chains. Making Project Gigatron “voluntary” was the way they marketed how they envision their future suppliers. Although it might seem too soft, by allowing their suppliers to opt-in, it seems what they are actually doing is attracting first-movers and early adopters to try this program with them. I 100% agree with you that voluntary is not enough, but starting something from scratch and imposing on their supply chain could bring political and economical challenges to everyone (Walmart & suppliers alike).
By making this program (initially) voluntary, Walmart not only identifies the suppliers who are most aligned to their values, but also sends a message to all of them: right now it might not be voluntary, but you [supplier] better start thinking about this, because in the future this can become mandatory. And with data from the voluntary participants, whatever Walmart decides as a mandatory condition will be much more effective to reduce carbon emissions.
Thank you for this interesting essay. I wasn’t aware of this project and didn’t know about Wallmart efforts to reduce emission rates.
Even though every environmental initiative seems important and helpful, I have to admit that I wasn’t extremely impressed by Gigaton project.
We know that retailers measure themselves mainly with numbers. They care mostly about their margins, growth rates and turnovers. I find it hard to believe that under these terms, Wallmart would seriously consider supporting a voluntary project and really expect that it will lead to the desired results.
Wallmart has many leverages over their suppliers – they can demand more, and set rigorous conditions that will achieve better results (and much faster). Their decision to keep this initiative dependant on their supplier goodwill enhances my suspicion that this is mainly a publicity stunt and nothing more.
This is a promising first step, but I echo your concerns that without an enforcement mechanism (policy changes or imposing mandatory supplier requirements), the effect might be limited unless Walmart can convince the rest of its supply chain that the social benefits and / or cost savings are meaningful enough to warrant changes.
Another interesting consideration is the carbon efficiency of different channels for Walmart. I was surprised to learn that brick-and-mortar is typically more environmentally efficient than e-commerce on a per item basis for purchases by Walmart customers, given larger in-store basket size, reduced packaging, and the tendency for multi-item orders to arrive in multiple deliveries [1]. As e-commerce gains traction and Walmart / Jet.com tries to compete with Amazon’s grocery and hard / soft line delivery, its sustainability may decline. Walmart needs to be thoughtful about the potential environmental trade offs of increasing its e-commerce sales, given its Gigaton mission.
Source:
[1] http://www.bain.com/publications/articles/how-to-cut-carbon-emissions-as-ecommerce-soars.aspx
Wal-Mart has tremendous clout on its suppliers, given its size, and any effort that Wal-Mart leads will impact not only its own supply chain but that of its suppliers. It will also, in my opinion, have a competitive impact, as shareholders, NGOs and the general public are likely to demand similar behavior and goals from Wal-Mart’s major competitors like Target and Kroger.
It will be very interesting to know what Wal-Mart’s current carbon footprint is at the time of the start of project Gigaton. While the Gigaton in savings is certainly an impressive number, we should compare it to the total footprint that Wal-Mart currently has to better understand the size and scope of the project impact.
It is also interesting to note that Wal-Mart started this effort in 2016, which is somewhat late, compared to the magnitude and prior visibility to this problem. For example, UPS initiated its sustainability efforts and voluntarily started reporting according to the Global Reporting Initiative (GRI) standards since 2003.
Source:
[1] https://sustainability.ups.com/sustainability-reporting/